In a marvelous new book, Sarah E. Kreps surveys the shifting relationship between democracy, defense, and finance, and finds the health of all three shaky.
Kreps, a Cornell professor who is currently an adjunct scholar at West Point’s Modern War Institute, is trying to explain both the public’s propensity for sacrifice and leaders’ strategies to pay for conflicts abroad. Mostly she examines histories of the Quasi War (1798-1800), the War of 1812, the Spanish-American War, World Wars I and II, Korea, Vietnam, Afghanistan, and Iraq—but the Mexican-American War, the Civil War, and the Cold War make cameos. The penultimate chapter uses surveys and experiments to collect cross-national evidence, primarily from the United States, Britain, and France, but secondarily from India and Israel.
The central argument of Taxing Wars: The American Way of War Finance and the Decline of Democracy is that outcomes are determined by the type of war and state-society relations. A weak state—for example, the early United States fighting limited wars, such as the War of 1812—pays for these conflicts with traditional politics. That is to say, the state raises taxes. As wars become more total, like the world wars and Civil War, the state becomes stronger and finances its wars mostly with liberty bonds. Yet with the decline of total wars, voters no longer see the need to raise taxes to fight minor conflicts, so politicians engage in what Kreps calls “hide-and-seek” behavior: concealing the costs of the conflict, especially through borrowing.
The major implications of her work are that we will be in the world of limited conflicts and hide-and-seek financing for the foreseeable future, and that is an explosion waiting to happen. In a sense, the explosions have already started. The great disasters that laid the groundwork for America’s present problems: the Iraq invasion and the financial crisis of late 2007 to 2009 were in part products of the poor incentives that policymakers faced. Strategic and financial solvency have fallen out of fashion. Leaders are not being punished for financial or foreign policy overextension.
These implications have immense ripple effects. Most obviously, putting wars on the country’s credit card likely raises the costs ultimately paid. Yet it also means that today’s voters are playing fast and loose with other people’s lives and money: only military families shoulder the blood burden and only the next generation pays the cost in treasure. Hide-and-seek financing is only one symptom of a syndrome; other symptoms include private security companies (read mercenaries and contractors), drones, and volunteer soldiers. Taken together, these symptoms relax accountability, so politicians are freer to fight ill-advised or open-ended wars, and voters are freer to ignore bills they probably won’t pay.
Others have covered similar ground, but only Kreps pulls the picture together concisely and comprehensively. Her argument is incisive and persuasive, and her evidence is a sturdy mix of methods and cases. Taxing Wars will be a big factor in big debates going forward.
The book’s title is something of a misnomer, for the author’s chief finding is that modern wars aren’t taxing relative to their predecessors, and her cross-national data strongly suggest that there’s nothing American about this way of war finance. But the “decline of democracy” in the subtitle is spot on. Although Kreps points to some ways in which politicians retain agencies’ hiding the costs of conflict to get in and stay in wars, shifting what burdens there are along partisan lines, the key parts of the story are about how different democracies around the world have ended up in the same place. Further, the logic she spells out might be relevant, not just to financing war, but to financing anything. It might apply to non-democracies, too. The dysfunctions Kreps catalogs go deep and global.
What, then, should the United States do? After 221 pages of able description and explanation, Kreps saves the last paragraph for potential remedies: “The answer may lie in finding other ways to manufacture accountability, whether through mandatory legislative reviews or perhaps through a small but visible tax that is linked to the war.” Worth a try. Yet the odds are good that neither path is viable or feasible. Mandatory legislative reviews only rehash previous congressional failures to rein in the commander-in-chief, failures the public seems not to mind (Congress’ approval ratings generally lag substantially behind presidential approval ratings), and efforts to institute war taxes are even less popular nowadays than they’ve ever been.
And there’s the rub. The decline of democracy is back by popular demand. Voters dislike unaccountable politicians, but not enough to increase accountability, though they have the tools to do so. They want guns and butter but they don’t want to pay for either of them. Politicians aren’t held accountable because voters don’t want to be held accountable, and international conditions have been unusually slow to hold polities accountable. Yet things that cannot go on forever must stop. Inevitably, voters will be held accountable by those they hold most dear. The reckoning will fall on our children and grandchildren, and they would be right to feel wronged.
The solutions are simple but not easy. Don’t fight wars you don’t pay for, and punish politicians who try to. Raise taxes to pay for what the government does (as Kreps points out, majorities are most loath to cut domestic spending, American effective tax rates are quite low relative to peers, and Americans’ complaints that taxes are too high do not correlate with top U.S. tax rates). Reintroduce the draft. Call out wishful thinking and magical budgeting; implement stronger checks on them. Ideally, such policies would be institutionalized, but realistically, political polarization makes that a pipe dream for now.
Nonetheless, norms change, and if more voters see that democracy’s way of financing wars is hurting the American way of upward mobility for the country and its citizens, then the decline of democracy can be reversed. Kreps’ message should be a widely heard alarm bell. Buy this book; share it with friends.